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Table of Contents

Flow Cryptocurrency (FLOW) Explained

Everything you need to know about the flow blockchain and cryptocurrency

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Flow is a blockchain platform that originally was designed for gaming purposes, but has expanded since its launch in 2020. The flow blockchain enables fast, low-cost transactions and supports smart contracts. It powers blockchain applications including NBA Top Shot, a non-fungible token (NFT) offering. Flow also has a native cryptocurrency that trades under the symbol FLOW.

If you are considering investing in FLOW, it’s essential to understand how flow works and compares to the leading blockchains. Here’s a closer look at flow, both the cryptocurrency and blockchain platform.

What Is Flow?

Flow is a blockchain network designed to enable transactions that are fast and cheap. The flow blockchain is a competitor to ethereum, another blockchain platform that supports a native currency plus an ecosystem of blockchain-based projects.

The flow blockchain was developed by Dapper Labs. Dapper Labs is also the team behind CryptoKitties, a blockchain-based game to buy, sell, create, and trade digital cats.

The flow blockchain was launched in conjunction with Dapper Labs’ NBA Top Shot, a blockchain-based digital collectibles marketplace that specializes in basketball cards. According to Dapper Labs, as of May 2022, the flow blockchain has processed more than 20 million NBA Top Shot transactions worth over $1 billion.

Flow was first built as a tool for Dapper Labs’ game developers to meet their own needs, and later launched publicly to support other decentralized applications.

The coin supply is not capped, although the inflation rate of FLOW—the annual rate at which new tokens are generated as rewards leading to an increase in supply—is currently limited to 3.75%.

Special Features of Flow

The flow blockchain was designed to support games and consumer applications, and can potentially process the transactions of millions of active users. Games, collectibles, and related apps can be supported by the flow blockchain.

By supporting interaction among smart contracts, the flow blockchain is positioned to allow for a large number of applications on its platform, much like the ethereum blockchain.

Flow also claims it is more efficient than other blockchains because the job typically done by each miner—computers that work to verify transactions and maintain the blockchain’s records—is divided across five nodes. Such segmentation, according to Flow, reduces redundancy in the work done by each node and results in faster throughput.

Here’s a snapshot of the flow blockchain:

Flow
Inception May 2020
Already Mined / Total Supply (as of May 25, 2022) 1.37 billion / no maximum supply
Transaction Processing Speed 10 seconds
Transaction Processing Cost 0.00001 FLOW (~$0.000049)
Special Feature Designed for games and consumer applications, divides work done by each miner to increase network efficiency

How To Mine FLOW

The flow blockchain uses a modified version of the proof-of-stake mechanism to achieve consensus, which means that cryptocurrency transactions are validated rather than mined. The flow network consists of nodes that perform specialized tasks. Flow’s blockchain divides tasks that are typically performed by a single validator among several network participants.

To process cryptocurrency transactions and add new blocks to the blockchain, flow relies on these four types of nodes:

  • Consensus nodes: These nodes determine the presence and order of transactions on the flow blockchain.
  • Execution nodes: They run the computations required to complete and verify flow transactions.
  • Verification nodes: The activities of execution nodes are monitored and verified by verification nodes.
  •  Collection nodes: Collection nodes exist to enhance network connectivity and data availability across the flow blockchain.

The flow blockchain also uses another cryptographic technique called the Specialized Proofs of Confidential Knowledge (SPoCKs), to ensure that the execution and verification nodes are doing their jobs properly.

SPoCK, according to Flow, is information unique to every node and cannot be forged. Using this information, the nodes must show their work or how they completed their task in order to get paid. This helps prevent execution nodes from copying others’ work and verification nodes from accepting results without checking.

How To Invest in Flow

If you want to add FLOW to your cryptocurrency portfolio, you can purchase it via a cryptocurrency exchange. You also need a cryptocurrency wallet compatible with the tokens.

Not many standalone digital wallets currently support FLOW. One alternative is the Ledger hardware wallet.

After establishing a compatible wallet, you can follow these steps to purchase the cryptocurrency:

  1. Choose a cryptocurrency exchange: The exchange of tokens is supported by Kraken, and KuCoin, among others. You can choose the exchange that’s most convenient for you.
  2. Fund your digital wallet: Whether your digital wallet is hosted by the cryptocurrency exchange or is self-custodial, your next step is to fund the account using another currency. You can deposit fiat currency such as U.S. dollars or transfer cryptocurrency such as bitcoin or ethereum.
  3. Initiate a purchase order: Via the user interface of the cryptocurrency exchange, search for “FLOW” to purchase the digital currency. Enter the required information to prepare your order, then click the “buy” button.

Always double-check the transaction details before making any cryptocurrency purchase, because they are nearly impossible to reverse.

Transaction Times

Flow claims that by dividing up the work done by nodes, it ensures faster verification of blocks on the blockchain. At launch in 2020, Flow said it was processing 10 blocks in 10 seconds, so that would translate into a block per second. Processing time for a block on the bitcoin blockchain is around 10 minutes on average and 12-14 seconds on the ethereum network.

According to Kraken, it takes 30 confirmations and approximately one minute for a FLOW cryptocurrency transaction to go through on the exchange. That is much faster compared to Kraken’s transaction time for ether, which is five minutes.

Fees and Expenses

On April 29, 2022, flow network participants voted to put in place a new fee structure. This new structure would mean different fees for different types of transactions on the network based on the effort required to complete them, rather than a flat fee of 0.00001 FLOW per transaction that was in place previously.

Notable Happenings

The flow blockchain is still only two years old, but there are a number of interesting developments in its short life. These are some of the notable happenings:

  • September 2019: Dapper Labs announces the creation of the flow blockchain.
  • May 2020: The flow blockchain becomes operational.
  • June 2020: NBA Top Shot is launched as the first application supported by the flow blockchain.
  • April 2022: Flow network votes to implement a new variable transaction fee structure.

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